Border Dispute Casts Shadow on Li's India Visit

By

Joanna Sugden

Updated May 19, 2013 7:04 a.m. ET

NEW DELHI—Chinese Premier Li Keqiang arrived in India on Sunday following a border dispute that is likely to overshadow the visit.

Tensions on the nations' boundary in the Ladakh area in the western Himalayas flared in mid-April, when India said China had pitched tents 12 miles within its territory and responded by moving more troops into the area. China, which won a 1962 war against India over the still-contested border, denied any incursion.

As soon as Chinese Premier Li Keqiang visited India for his first official visit, attention turned to a territorial dispute. The WSJ's Joanna Sugden talks about why the dispute could get in the away of ambitious bilateral trade targets.

Mr. Li's visit, his first overseas since becoming prime minister in March, comes after troops from both sides withdrew on May 5 to positions held before mid-April, ending the standoff.

India and China for decades have been rival regional powers. In recent years, as trade between the countries has boomed, they have attempted to smooth over regular border disputes.

Bilateral trade rose by about a third to nearly $76 billion in the year ended March 31, 2012, and the countries hope to boost it to $100 billion by 2015.

But the recent standoff indicates that the border issue remains an obstacle to closer ties.

A senior Indian official said New Delhi was unclear whether Beijing had ordered the alleged incursion or it was the result of an unsanctioned decision by a low-level Chinese officer on the border.

"However much progress we make in other areas of our relationship, we will have to find a resolution to the border," a senior Indian official said. "It has reminded us once again that the border issue is something that is stand-alone. We will have to negotiate this carefully."

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Boundary discussions will feature more prominently than planned during the Chinese delegation's four-day visit to New Delhi and Mumbai, the official added.

Mr. Li met on Sunday with Indian Prime Minister Manmohan Singh, and will meet Monday with Sonia Gandhi, president of the country's ruling Congress party. He travels Tuesday to Mumbai, the financial capital.

In a statement released upon his arrival in New Delhi on Sunday afternoon, Premier Li said he wanted to "hear from our Indian friends on how to take ties forward." Mr. Li added that he was confident his visit would "boost cooperation and trust" between the two nations.

In a news briefing on May 14, Hong Lei, China's Foreign Ministry spokesman, said the two prime ministers would have "an in-depth exchange of views on China-India relations."

Brahma Chellaney, professor of strategic studies at the Centre for Policy Research, a New Delhi-based think tank, said India had bet its growing trade ties with China could mute political disputes—a hope that isn't playing out.

"Now India is discovering the hard way that politics and economics are going in opposite directions," Mr. Chellaney said.

For India's military, a border incursion by Chinese troops is worrisome, said Gareth Price, a senior research fellow at Chatham House, a London-based foreign-affairs think tank. However, he said, for those involved in trade, the border dispute is insignificant.

"If you are a businessman doing big business with China, then you don't care about an incursion somewhere up in Ladakh," Mr. Price added.

Trade was supposed to be the focus of Mr. Li's maiden visit to India. China exports huge amounts of goods such as telecommunications and power equipment to India.

New Delhi, which runs a wide trade deficit with Beijing, wants better access to China for its information technology and pharmaceutical products. India's trade deficit with China jumped 42% to nearly $40 billion in the latest fiscal year. China is now India's largest source of imports, recently overtaking the U.S., Germany and Japan, according to Indian government data.

A trade delegation, including China's Commerce Minister Gao Hucheng and Foreign Minister Wang Yi, will meet Indian officials in New Delhi for talks on bilateral trade Monday, and Mr. Li will visit three chambers of commerce in Mumbai on Tuesday.

India will likely raise the lopsided trading relationship with its Asian rival, the Indian government official said.

Many economists say India will achieve trade parity with China only when it develops a more mature manufacturing base.

New Delhi remains frustrated that trade talks that began in late 2010 have yet to yield significant benefits for India.

"The priority is to set the relationship with the new Chinese administration," the Indian official said. China completed its once-a-decade leadership change in March.

Mr. Li will depart India on Wednesday morning for Pakistan, where he will stay until Thursday, on the invitation of President Asif Ali Zardari. Though the new government, elected at the May 11 polls, won't be in place, Mr. Li will meet Nawaz Sharif, who is expected to become the next prime minister; Mr. Sharif heads the Pakistan Muslim League-N, the rival to Mr. Zardari's Pakistan Peoples Party.

A spokesman for Pakistan's Ministry of Foreign Affairs said at a news briefing in Islamabad on May 16 that "the friendship with China is the cornerstone of Pakistan's foreign policy."

The decadeslong alliance between Pakistan and China is based on mutual animosity toward India. For Pakistan, China is a crucial alternative strategic ally to the U.S., as relations between Islamabad and Washington frequently sour.

Pakistan, which is desperately short of energy, is in talks with China to buy a 1,000-megawatt nuclear reactor, a concern to Washington and a potential breach of the regulations that govern trade in civil nuclear technology. It is possible that a deal on the reactor could be announced during Mr. Li's visit.

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